38 postal execs earn more than Cabinet members

Nov. 27, 2011 - 04:38PM
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More than three dozen Postal Service executives, including Postmaster General Patrick Donahoe, left, and former Postmaster General John Potter, earn more than Cabinet secretaries. ()

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As the U.S. Postal Service was careening toward a record $8.5 billion loss in 2010, it was paying more than http://apps.federaltimes.com/projects/usps-compensation/">three dozen top executives and officers salaries and bonuses exceeding that of Cabinet secretaries — almost triple the number who were in that category only a year before, according to newly disclosed figures.

Since executive salaries were frozen in 2010, the jump in the number of executives earning more than Cabinet secretaries was the result of performance-based bonuses.

Last week, Postmaster General Patrick Donahoe defended the bonuses, saying they were awarded under the agency's pay-for-performance system after several years of no salary changes.

This year, both salaries and performance bonuses for executives are frozen. A list of postal executives earning more than Cabinet secretaries in 2011 is not yet available.

USPS leaders have been pressing the agency's four unions to accept pay cuts, at least for new hires. They are also asking Congress for permission to end no-layoff protections and create a lower-cost health plan as an alternative to the Federal Employees Health Benefits Program.

"If we're being asked to make any concessions, then they should be across the board," said John Hegarty, president of the National Postal Mail Handlers Union, which is negotiating a new contract with the mail carrier.

By law, the Postal Service has to report each employee who makes more than Level 1 of the Executive Schedule, which sets the base salary for Cabinet chiefs. In 2009, that figure was $196,700; in 2010, $199,700.

Last year, 38 top USPS officials fell in that category, according to a congressionally required report released this month. Leading the pack was then-Postmaster General John Potter, whose total reported pay of almost $543,000 was boosted by the exit package he received upon retiring. But he was joined by 37 vice presidents and other officials, according to the agency's latest annual report released this month. All made more than $200,000, figures indicate.

In 2009, 13 Postal Service employees exceeded the Level 1 cap, including Potter, Donahoe, who was deputy postmaster general at the time, and longtime General Counsel Mary Anne Gibbons.

Postal executive pay has long been a bone of contention for rank-and-file employees and some members of Congress. At a March 2009 congressional hearing, for example, Potter had to defend his compensation package, including a $130,000 bonus, against lawmakers' criticism that it was unwarranted in light of the agency's deteriorating finances.

"If you have a team that keeps coming up in the red, at a certain point, you can't be giving bonuses to the coach," Rep. Jason Chaffetz, R-Utah, said at the time.

Rep. Dennis Ross, R-Fla., who chairs the House subcommittee that oversees the Postal Service, said in a statement last week that the revelation that 38 postal executives earned so much is "quite troubling and underscores the need for a fix that is more than just window dressing."

"The USPS must become leaner and less bureaucratic from top to bottom. From executive compensation to no-layoff contracts, if the USPS is to survive it must, among other reforms, drastically reduce labor costs across the board," Ross added.

The Postal Service receives no taxpayer money for operating expenses and is legally required to provide employee pay and benefits comparable to that of private businesses. Under the 2006 Postal Accountability and Enhancement Act, the Postal Service may fill up to 12 critical positions on a pay scale worth up to 120 percent of the vice president's salary, or almost $277,000, USPS spokesman Mark Saunders said in an email.

"As we continue to adjust to a changing business environment, it's important that we recruit and retain the forward-thinking leadership we need to continue to remain viable," Saunders said. "Compensation is important to that equation."

Postal Service officials have long argued that the agency needs competitive compensation packages to attract top executive talent to run one of the world's largest businesses. The Postal Service ranked 109th on CNN's list of the 500 biggest global companies in 2011, ahead of companies such as Boeing, Microsoft and PepsiCo.

In a separate interview, Donahoe said the pay-for-performance system is based on objective ratings tied to meeting goals in service, finances and other areas. In regard to last year's increases, he said, "there were no automatic raises or anything like that."

Announced last summer, the pay freeze for executives and officers will continue through 2012.

The number of USPS officials whose pay exceeds the Cabinet-level pay varies annually. In 2007, when that threshold stood at $186,600, 45 postal employees topped it.

But more scrutiny of compensation may be needed in light of the agency's worsening financial plight and the growing probability of a government bailout, said Pete Sepp, spokesman at the National Taxpayers Union, a watchdog group.

"The case that the Postal Service will never rely on tax dollars is getting pretty weak," he said.

Already, the Postal Service's latest financial statement says it is close to tapping out a $15 billion line of credit from the U.S. Treasury. Earlier this month, the agency reported a $5.1 billion net loss for fiscal 2011, driven by a continuing decline in profitable first-class mail volume. The amount of red ink would have been far higher if Congress had not delayed a $5.5 billion payment to a retiree health care fund originally due Sept. 30, the final day of the fiscal year. That deadline has since been pushed back to Dec. 16, but USPS officials say they lack the money to cover it.

Officials also warn that the Postal Service could run out of money late next year, unless Congress both grants it more management freedom and drops the requirement to pre-pay retiree health benefits.

The rationale for reviewing managerial compensation may be as much political as economic, Sepp said. While postal managers have made some progress in making the agency efficient, he said, "there's a long way to go that's going to take buy-in from a lot of people."